Question 1

When marginal revenue equals marginal cost, the firm

Accepted Answer

A) should increase the level of production to maximize its profit. 
B) may be minimizing its losses rather than maximizing its profit. 
C) must be generating positive economic profits. 
D) must be generating positive accounting profits. 
A) should increase the level of production to maximize its profit. 
B) may be minimizing its losses rather than maximizing its profit. 
C) must be generating positive economic profits. 
D) must be generating positive accounting profits.

Question 2

Which of the following firms is the closest to being a perfectly competitive firm?

Accepted Answer

A) An avocado farmer in California 
B) Microsoft Corporation 
C) Ford Motor Company 
D) An aerospace company 
A) An avocado farmer in California 
B) Microsoft Corporation 
C) Ford Motor Company 
D) An aerospace company

Question 3

When a competitive firm produces and sells 600 units of output, its total revenue is $35,970. What is the firm's total revenue when it produces and sells 620 units of output?

Accepted Answer

The price (average revenue) is

Question 4

When buyers in a competitive market take the selling price as given, they are said to be

Accepted Answer

A) price takers. 
B) market entrants. 
C) monopolists. 
D) free riders. 
A) price takers. 
B) market entrants. 
C) monopolists. 
D) free riders.

Question 5

Scenario 14-2
The information below applies to a competitive firm that sells its output for $45 per unit.
• When the firm produces and sells 120 units of output, its average total cost is $23.5.
• When the firm produces and sells 121 units of output, its average total cost is $23.65.
-Refer to Scenario 14-2. Let Q represent the quantity of output. Which of the following magnitudes has the same value at Q = 120 and at Q = 121?

Accepted Answer

A) Average fixed cost 
B) Average revenue 
C) Total cost 
D) Total revenue 
A) Average fixed cost 
B) Average revenue 
C) Total cost 
D) Total revenue

Question 6

Table 14-1
​
​
 $$\begin{array} { | c | c | } 
\hline \begin{array} { c } 
\text { Price } \
\text { (Dollars per unit) }
\end{array} & \begin{array} { c } 
\text { Quantity Demanded } \
\text { (Units) }
\end{array} \
\hline 5 & 0 \
\hline 5 & 2 \
\hline 5 & 4 \
\hline 5 & 6 \
\hline 5 & 8 \
\hline 5 & 10 \
\hline 5 & 12 \
\hline 5 & 14 \
\hline 5 & 16 \
\hline 5 & 18 \
\hline
\end{array}$$
-Refer to Table 14-1. Over what range of output is marginal revenue declining?

Accepted Answer

A) 2 to 12 units 
B) 6 to 14 units 
C) 14 to 18 units 
D) Marginal revenue is constant over the entire range of output. 
A) 2 to 12 units 
B) 6 to 14 units 
C) 14 to 18 units 
D) Marginal revenue is constant over the entire range of output.

Question 7

In a certain market there are many buyers and many sellers. It is easy to distinguish the product sold by one firm from the products sold by other firms. Is the market competitive?

Accepted Answer

The market is not competitive

Question 8

Figure 14-2
Suppose a firm operating in a competitive market has the following cost curves:
​  
-Refer to Figure 14-2. If the market price is $6, what is the firm's short-run economic profit?

Accepted Answer

A) $0 
B) $12 
C) $15 
D) $18 
A) $0 
B) $12 
C) $15 
D) $18

Question 9

The competitive firm's long-run supply curve is that portion of the marginal cost curve that lies above average

Accepted Answer

A) fixed cost. 
B) variable cost. 
C) total cost. 
D) revenue. 
A) fixed cost. 
B) variable cost. 
C) total cost. 
D) revenue.

Question 10

A firm is currently producing 100 units of output per day. The manager reports to the owner that producing the 100th unit costs the firm $5. The firm can sell the 100th unit for $4.75. The firm should continue to produce 100 units in order to maximize its profits (or minimize its losses).

Accepted Answer

A) True 
 B)False

Question 11

A firm operating in a perfectly competitive industry will continue to operate in the short run but earn losses if the market price is less than that firm's average total cost but greater than the firm's average variable cost.

Accepted Answer

A) True 
 B)False

Question 12

A competitive market will typically experience entry and exit until accounting profits are zero.

Accepted Answer

A) True 
 B)False

Question 13

Table 14-4
The following table presents cost and revenue information for a firm operating in a competitive industry.
​
​
  
-Refer to Table 14-4. What is the total revenue from selling 4 units?

Accepted Answer

A) $120 
B) $257 
C) $317 
D) $480 
A) $120 
B) $257 
C) $317 
D) $480

Question 14

Figure 14-1
Suppose that a firm in a competitive market has the following cost curves:   ​
-Refer to Figure 14-1. If the market price is $12, the firm will earn

Accepted Answer

A) positive economic profits in the short run. 
B) negative economic profits in the short run but remain in business. 
C) negative economic profits and shut down. 
D) zero economic profits in the short run. 
A) positive economic profits in the short run. 
B) negative economic profits in the short run but remain in business. 
C) negative economic profits and shut down. 
D) zero economic profits in the short run.

Question 15

Suppose a firm in a competitive market increases its output by 25 percent. As a result, the price of its output is likely to

Accepted Answer

A) decline by 25 percent. 
B) remain unchanged. 
C) increase by less than 25 percent. 
D) decline by more than 25 percent. 
A) decline by 25 percent. 
B) remain unchanged. 
C) increase by less than 25 percent. 
D) decline by more than 25 percent.

Question 16

Figure 14-3
Suppose a firm operating in a competitive market has the following cost curves:  
-Refer to Figure 14-3. When market price is P2, a profit-maximizing firm's losses can be represented by the area

Accepted Answer

A) (P4 − P2) × Q2. 
B) (P2 − P1) × (Q2 − Q1). 
C) At a market price of P2, the firm earns profits, not losses. 
D) At a market price of P2 the firm has losses, but the reference points in the figure don't identify the losses. 
A) (P4 − P2) × Q2. 
B) (P2 − P1) × (Q2 − Q1). 
C) At a market price of P2, the firm earns profits, not losses. 
D) At a market price of P2 the firm has losses, but the reference points in the figure don't identify the losses.

Question 17

Table 14-1
​
​
 $$\begin{array} { | c | c | } 
\hline \begin{array} { c } 
\text { Price } \
\text { (Dollars per unit) }
\end{array} & \begin{array} { c } 
\text { Quantity Demanded } \
\text { (Units) }
\end{array} \
\hline 5 & 0 \
\hline 5 & 2 \
\hline 5 & 4 \
\hline 5 & 6 \
\hline 5 & 8 \
\hline 5 & 10 \
\hline 5 & 12 \
\hline 5 & 14 \
\hline 5 & 16 \
\hline 5 & 18 \
\hline
\end{array}$$
-Refer to Table 14-1. If the firm doubles its output from 6 to 12 units, total revenue will

Accepted Answer

A) increase by less than $30. 
B) increase by exactly $30. 
C) increase by more than $30. 
D) Total revenue cannot be determined from the information provided. 
A) increase by less than $30. 
B) increase by exactly $30. 
C) increase by more than $30. 
D) Total revenue cannot be determined from the information provided.

Question 18

Why would a firm in a perfectly competitive market always choose to set its price equal to the current market price? If a firm set its price below the current market price, what effect would this have on the market?

Accepted Answer

The firm could not sell any more of its

Question 19

Table 14-6
Suppose that a firm in a competitive market faces the following revenues and costs:
​
​
 $$\begin{array} { | c | c | c | } 
\hline \begin{array} { c } 
\text { Quantity } \
\text { (Units) }
\end{array} & \begin{array} { c } 
\text { Total Revenue } \
\text { (Dollars) }
\end{array} & \begin{array} { c } 
\text { Total Cost } \
\text { (Dollars) }
\end{array} \
\hline 0 & 0 & 3 \
\hline 1 & 6 & 5 \
\hline 2 & 12 & 8 \
\hline 3 & 18 & 12 \
\hline 4 & 24 & 17 \
\hline 5 & 30 & 23 \
\hline 6 & 36 & 30 \
\hline 7 & 42 & 38 \
\hline
\end{array}$$ ​
-Refer to Table 14-6. The firm should not produce an output level beyond

Accepted Answer

A) 4 units. 
B) 5 units. 
C) 6 units. 
D) 7 units. 
A) 4 units. 
B) 5 units. 
C) 6 units. 
D) 7 units.

Question 20

​A ski resort will choose to remain open in the summer whenever its fixed costs are low enough.

Accepted Answer

A) True 
 B)False

Exam 14: Firms in Competitive Markets

When marginal revenue equals marginal cost, the firm

Which of the following firms is the closest to being a perfectly competitive firm?

When a competitive firm produces and sells 600 units of output, its total revenue is $35,970. What is the firm's total revenue when it produces and sells 620 units of output?

When buyers in a competitive market take the selling price as given, they are said to be

Table 14-1 ​ ​ Price (Dollars per unit) Quantity Demanded (Units) 5 0 5 2 5 4 5 6 5 8 5 10 5 12 5 14 5 16 5 18 -Refer to Table 14-1. Over what range of output is marginal revenue declining?

In a certain market there are many buyers and many sellers. It is easy to distinguish the product sold by one firm from the products sold by other firms. Is the market competitive?

Figure 14-2 Suppose a firm operating in a competitive market has the following cost curves: ​ -Refer to Figure 14-2. If the market price is $6, what is the firm's short-run economic profit?

The competitive firm's long-run supply curve is that portion of the marginal cost curve that lies above average

A firm is currently producing 100 units of output per day. The manager reports to the owner that producing the 100th unit costs the firm $5. The firm can sell the 100th unit for $4.75. The firm should continue to produce 100 units in order to maximize its profits (or minimize its losses).

A firm operating in a perfectly competitive industry will continue to operate in the short run but earn losses if the market price is less than that firm's average total cost but greater than the firm's average variable cost.

A competitive market will typically experience entry and exit until accounting profits are zero.

Table 14-4 The following table presents cost and revenue information for a firm operating in a competitive industry. ​ ​ -Refer to Table 14-4. What is the total revenue from selling 4 units?

Figure 14-1 Suppose that a firm in a competitive market has the following cost curves: ​ -Refer to Figure 14-1. If the market price is $12, the firm will earn

Suppose a firm in a competitive market increases its output by 25 percent. As a result, the price of its output is likely to

Figure 14-3 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-3. When market price is P2, a profit-maximizing firm's losses can be represented by the area

Table 14-1 ​ ​ Price (Dollars per unit) Quantity Demanded (Units) 5 0 5 2 5 4 5 6 5 8 5 10 5 12 5 14 5 16 5 18 -Refer to Table 14-1. If the firm doubles its output from 6 to 12 units, total revenue will

Why would a firm in a perfectly competitive market always choose to set its price equal to the current market price? If a firm set its price below the current market price, what effect would this have on the market?

​A ski resort will choose to remain open in the summer whenever its fixed costs are low enough.

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Applications: The Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers in Microeconomics

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

Tools of Finance

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

Filters

Table 14-1 Price (Dollars per unit) Quantity Demanded (Units) 5 0 5 2 5 4 5 6 5 8 5 10 5 12 5 14 5 16 5 18 -Refer to Table 14-1. Over what range of output is marginal revenue declining?

Figure 14-2 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-2. If the market price is $6, what is the firm's short-run economic profit?

Table 14-4 The following table presents cost and revenue information for a firm operating in a competitive industry. -Refer to Table 14-4. What is the total revenue from selling 4 units?

Figure 14-1 Suppose that a firm in a competitive market has the following cost curves: -Refer to Figure 14-1. If the market price is $12, the firm will earn

Figure 14-3 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-3. When market price is P₂, a profit-maximizing firm's losses can be represented by the area

Table 14-1 Price (Dollars per unit) Quantity Demanded (Units) 5 0 5 2 5 4 5 6 5 8 5 10 5 12 5 14 5 16 5 18 -Refer to Table 14-1. If the firm doubles its output from 6 to 12 units, total revenue will

A ski resort will choose to remain open in the summer whenever its fixed costs are low enough.